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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






2. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






3. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






4. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






5. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






6. Total product divided by labor employed. APL = TPL/L






7. The sum of consumer surplus and producer surplus






8. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






9. The mechanism for combining production resources - with existing technology - into finished goods and services






10. ATC = TC/Q = AFC + AVC






11. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






12. The imbalance between limited productive resources and unlimited human wants






13. Ed = 1






14. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






15. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






16. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






17. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






18. Two goods are consumer substitutes if they provide essentially the same utility to consumers






19. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






20. The rational decision maker chooses an action if MB = MC






21. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






22. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






23. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






24. The additional cost incurred from the consumption of the next unit of a good or a service






25. MUx / Px = MUy/Py or MUx/MUy = Px/Py






26. Ei > 1






27. Models where firms are competitive rivals seeking to gain at the expense of their rivals






28. TR = P * Qd






29. Ed > 1 - meaning consumers are price sensitive






30. When firms focus their resources on production of goods for which they have comparative advantage






31. 0 < Ei < 1






32. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






33. All firms maximize profit by producing where MR = MC






34. Entry (or exit) of firms does not shift the cost curves of firms in the industry






35. The additional benefit received from the consumption of the next unit of a good or service






36. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






37. Entry of new firms shifts the cost curves for all firms downward






38. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






39. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






40. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






41. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






42. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






43. The price of a good measured in units of currency






44. Occurs when LRAC is constant over a variety of plant sizes






45. The lost net benefit to society caused by a movement away from the competitive market equilibrium






46. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






47. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






48. Entry of new firms shifts the cost curves for all firms upward






49. Product demand - productivity - prices of other resources - and complementary resources






50. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit